Apple Expects First Ever Decline of iPhone Sales Next Quarter

Apple CEO Tim Cook confirmed during the company’s financial earnings conference call today that iPhone sales will likely decline in the March quarter, marking the first year-over-year decline since the smartphone was released in June 2007. The decline will be realized if Apple sells less than 61.2 million iPhones this quarter.

Apple forecasts that its total revenue in Q2 2016 will be between $50 and $53 billion, compared to $58 billion in the year-ago quarter, signaling the company’s first year-over-year drop in revenue in thirteen years. Apple has posted over 50 quarters of year-over-year revenue growth since 2003.

Apple is currently facing significant foreign exchange headwinds. A strong U.S. dollar makes it more difficult for Apple, which reports its earnings in U.S. dollars, to perform when some 66% of their business is overseas. Every $100 of Apple’s non-U.S. dollar revenue earned in Q4 2014 translates into only $85 U.S. dollars today.

Financial analysts had already predicted the iPhone would face its first quarterly sales decline in Q2 2016 compared to the year-ago quarter, with some reports claiming the iPhone 6s and iPhone 6s Plus may not outsell last year’s iPhone 6 and iPhone 6 Plus, its first devices with larger than 4-inch screens.

iPhone growth in the just-announced first fiscal quarter of 2016 was the slowest since the smartphone’s introduction in 2007. Apple sold a record 74.8 million iPhones during the quarter, which includes the busy holiday shopping season, up only 300,000 units from 74.5 million a year earlier.

Nevertheless, Cook said that 60% of customers who have owned an iPhone prior to the iPhone 6 and iPhone 6 Plus have not yet upgraded, meaning there is a large base of potential customers that could upgrade to newer models, including the iPhone 7 expected in September, over the coming year.

Today’s announcement has been referred to by some as “peak iPhone,” but Cook remains optimistic about annual iPhone sales in 2016. Even if Apple sells a projected 45 to 50 million iPhones next quarter, that would still be more revenue from one product than most companies earn overall in a single quarter.

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Apple CEO Tim Cook: Virtual Reality is ‘Really Cool, Has ‘Interesting Applications’

During today’s earnings call for the first fiscal quarter of 2016 (fourth calendar quarter), analyst Gene Munster asked Tim Cook to share his thoughts on virtual reality in an effort to get a hint on whether or not that’s a feature Apple is working on for future devices. “What are your thoughts on the VR theme?” Munster asked. “Is this a geeky niche or something that could go mainstream?”

In response, Tim Cook said that he does not believe that virtual reality is a niche. “It’s really cool,” he said. “And it has some interesting applications.”

With virtual reality products like the Oculus Rift gaining in popularity, there has been speculation that Apple will release some kind of virtual reality or augmented reality feature in its iOS devices. Apple reportedly has a small team of employees working on exploring the augmented reality field.

Last week, Apple hired one of the leading virtual reality experts in the United States, Doug Bowman. Apple has also made some recent acquisitions that point towards an interest in VR/AR, including augmented reality startup Metaio, real-time motion capture firm Faceshift, and expression analysis startup Emotient.

Apple has also filed several patents for virtual reality products over the years, including video goggles, motion-sensing 3D virtual interfaces for iOS devices, and 3D “hyper reality” displays.

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Apple has another record quarter, but iPhone sales growth slows to a halt

It’s going to be very interesting to see Apple spin these financials results. The company just announced its Q1 2016 results, and the company posted recored quarterly revenue and profit of $75.9 billion and $18.4 billion, respectively. That sounds great until you realize that the doomsaying over slowing iPhone sales has come true. Apple sold 74.8 million iPhones in its first full quarter of iPhone 6S and 6S Plus availability — up a meager 0.4 percent over a year ago.

The bad news continues when looking at the iPad — Apple moved 16.1 million tablets in the quarter, down 25 percent over a year ago. It looks like the iPad Pro isn’t the savior the company was looking for. Mac sales declined slightly as well, down 4 percent to 5.3 million units in the quarter.

While none of Apple’s main product lines had the growth we’ve come accustomed to seeing, there were a few additional bright spots in the company’s financials (beyond that record-breaking revenue and profit, of course). Apple’s recently-created “other products” category, which includes the Apple TV, Apple Watch, and the iPod, had the biggest quarter in terms of revenue since the company started reporting data in this fashion. Revenue of $4.4 billion in the “other products” category was up significantly quarter-over-quarter (44 percent) and year-over-year (63 percent). Of course, a year ago this category didn’t have an Apple Watch or a new Apple TV to buoy it, but still it seems both products likely were popular holiday gifts for the company.

It’s also worth noting that Apple’s “services” category also jumped up significantly this quarter — revenues of $6.1 billion are up 20 percent quarter-over-quarter and 27 percent year-over-year. It’s probable that people are buying more apps than ever for their iOS devices, spending cash on downloads for those new Apple TVs, and perhaps even subscribing to Apple Music.

Apple also pointed out that it now has over 1 billion active devices across all its product categories, including the Mac, iPad, iPhone, iPod touch, Apple TV and Apple Watch. Those devices have “engaged with Apple’s services” at some point during the last 90 days. CFO Luca Maestri said that was up over 25 percent compared to a year ago.

The company is holding its quarterly financial call with CEO Tim Cook at 5PM ET, and we’ll be listening in to see how Apple explains these results and what other details the company decides to share. Stay tuned!

[Image credit: Sefa Karacan/Anadolu Agency/Getty Images]

Source: Apple (BusinessWire)